Founder and CEO of Spark Systems
YEARS IN OPERATION: 4 months
THE TECH: Trading platform that cuts costs of forex transactions and their relay time.
[dropcap size=small]I[/dropcap]magine walking into a supermarket. You don’t buy anything and yet are expected to pay 40 per cent of the price for everything you thought of buying, simply for being there. It’s a ludicrous notion, but that’s the analogy Wong Joo Seng gives to illustrate the high transaction costs of forex trading.
After London and New York, Singapore is the third-largest foreign exchange trading hub in the world, and traders are more than familiar with the various foreign exchange platforms’ high costs. Wong, who used to run GK Goh Financial Services, had to pay about $8 million a year to trading platforms such as Reuters, Bloomberg and Currenex. Then, the company’s revenue was $20 million on US$1.5 trillion traded annually. The idea that he had to shell out 40 cents of every dollar earned to a mere marketplace had bothered him for years.
So he decided to build his own. Spark Systems, which he founded last year, promises not only to be cheaper to use – firms can save about 50 per cent on an almost $30 million bill on US$3 trillion traded, for example – but faster transaction speeds, allowing traders to act on prevailing prices more quickly. The nearest trading centre is located in Tokyo, and sending an order there and back takes about 120 milliseconds. Sending one to London, the world’s largest forex market, will take about 700 milliseconds both ways.
“On an average day, the market can handle that kind of latency, but when you have Brexit, the US elections, or if a bomb goes off somewhere, every millisecond counts,” he explains. “Many of the forex participants, corporate treasuries and liquidity provider banks here are sitting within a square kilometre of each other in the CBD, yet we are are sending our orders to London, New York or Tokyo and back to transact – this is something we don’t need to do.” Once it sets up a data centre in Singapore, participants here can execute a trade within 1 to 2 milliseconds.
Wong figured he would need US$5 million (S$6.7 million) to build the company, but investment demand was so overwhelming that existing investors had to top up their initial shares to retain their proportionate holdings in the company. Spark eventually took in US$8.7 million in its Series A funding round.
Its beta system went live in March this year with one hedge fund client, and was officially launched on July 3 with two more contracts with brokerage firms. The platform has grown from seeing half a billion in trades during the first week to $20 billion a month by September. It’s still a drop in the forex ocean, but a promising one.
Wong considers Spark Systems his third start-up. “The first was GK Goh Financial Services, even though ‘start-up’ wasn’t really a buzzword at the time. I was 35 when GK Goh approached me to build a derivative arm in 1998,” he recalls. “They told me they would put up all the capital, make me CEO and split the profits. It sounded like such a good deal at the time but after I built it, I realised I didn’t own a stake in it.”
It’s a lesson he took with him when he co-founded financial consultancy M-Daq in 2010, which saw him leading a successful Series C funding round (at a valuation of $250 million) in 2015. It also fuelled his passion for venture capitalism, which led him to join Vickers Venture Partners, where he still operates as a venture partner.
Wong’s experience as both start-up founder and investor gives him keen insight into what it takes to succeed. The 54-year-old says: “I’d rather invest in a brilliant team with a mediocre product than vice versa. The smart guys will know when they are walking into a wall and tweak the business model accordingly. They need a fine balance of bullheadness to chase their goal, without being too stubborn to admit when they are wrong.”
Of his latest start-up, he says: “I’m selling spades in a gold rush. As long as a trade goes through on Spark Systems, it rings the cash register, and everyone is happy. The key is simply to build an infrastructure that is resilient, fast and cheap, and to plant Singapore on the world map where trading is concerned.”
IN 60 SECONDS
As vice-president of Mensa Singapore, I’m trying to get the society to look outwards. Right now, the members are just getting together and playing chess, but it’ll be nice to see them solve problems like the issue of water supply. It could be a think-tank for offbeat ideas.
The last great book I read was The Soul’s Code by James Hillman. He says the human spirit doesn’t think small, but it gets hammered for doing so.
I unwind by driving with the Porsche Club. It’s a nice way to see the countryside and it’s good for me because if I’m not completely focused on anything, my mind automatically goes back to my work. But if I’m doing 200kmh on the open road, I have to focus on the road.
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